SMALL SCALE INDUSTRY IN NIGERIA: THE FINANCING QUESTION
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SMALL SCALE INDUSTRY IN NIGERIA: THE FINANCING QUESTION
Chapter one
1.0 Background of the Study
1.1 Introduction
Small-scale businesses are critical to the industrialization and economic growth processes in both emerging and developed countries. Aside from boosting per capita income and output, small-scale industry generates job possibilities, improves regional economic balance, and promotes efficient resource utilisation.
However, despite their importance, small-scale industries are hampered by insufficient finance and bad management. The adverse macroeconomic climate has also been cited as one of the primary restraints that often drive financial institutions to be risk-averse when funding small-scale businesses.
The unwillingness of financial institutions to support small-scale companies can be attributed to banks’ weak capital base and the lack of information that frequently exists between small-scale enterprises and lenders.
However, it is critical that the foundation of any corporate organisation and the financial resources accessible to them. In this research study, we will divert from the general aspect of small-scale businesses and discuss the challenges and opportunities for financing small-scale companies in Nigeria, where they have been recognised as a true engine of economic growth and development.
Umar (1997:15) stated in his own words that “In Nigeria, as in many other developing countries, financing and encouraging the establishment of small-scale enterprises have been crucially recognised as a viable approach for stimulating employment development, particularly in a situation of rapidly growing labour force and inadequate economic growth.
However, in order for small-scale industries to properly contribute to a country’s economic growth and development, they must be well supported or sponsored for its business operators and expansion.
In Nigeria, the government has formed institutions to give financial and non-financial assistance to small-scale companies. The federal government established several institutions to give loans to small-scale enterprises, including the National Directorate of Employment (NDE), the People’s Banks of Nigeria (PBN), the National Economic Reconstruction Fund (NERFUND), and the Nigeria Development Bank (NIBK).
Despite all of the government’s attempts to promote small-scale businesses in Nigeria, they (SSE) continue to confront challenges such as inadequate capital or funding, bad management, limited markets, and so on.
It is well recognised in the business community or environment that small-scale businesses are funded (S). It is difficult for sources to meet the collateral criteria necessary to get financial services from financial organisations (banks).
Also, the expense of administering small-scale loans, as well as the risk of default, work against banks issuing or facilitating loans to small borrowers.
In general, any commercial enterprise, large or little, requires finances to run, and these funds are obtained from a variety of sources. Personal savings, loans from friends and relatives, commercial and merchant banks, and government-assisted/specialized credit schemes/funds, such as the national economic reconstruction Fund (NERFUND)
the World Bank loan scheme, and so on, are all sources of funding/finance available to small-scale enterprises in Nigeria. Small-scale firms have fewer financing options than large-scale enterprises, as is well acknowledged.
Due to their (small-scale firms’) inexperience or inability to meet the requirements of financing organisations responsible for providing funds, as well as small-scale enterprises’ refusal to repay loans or funds lent to them on time.
In most situations, small businesses are unable to repay debts acquired due to poor financial management. Finance, as frequently said, is “the key factor or bedrock of business enterprise (s) and, in one way or another, becomes the key problem due to mismanagement of the available funds.”
Because of ignorance and illiteracy, several of these small-scale enterprises do not even know what methods or procedures to utilise to obtain the capital they require to operate.
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